Good afternoon everyone – I’m delighted to join you at the 2020 Bund Summit and give you an Australian perspective on what the COVID-19 pandemic means for the future of fintech.
I have proudly worked in financial services nearly all my professional life. It is a sector that has been central to Australia’s growth story.
The Australian fintech industry is building on these strong foundations, delivering quality amidst a supportive policy environment.
It’s been an incredibly difficult year for growing businesses right across the global economy; but despite these challenges, Australia’s fintech ecosystem has continued to grow.
It’s a testament to the agility of our fintech businesses that they’ve been able to adapt and persevere through this economic shock. The Australian Government sees exciting opportunities in fintech – opportunities that will set us up for a strong and secure recovery.
1. Role of banks/Australian system
The COVID-19 pandemic has placed enormous pressure on our health systems, communities and economies across the globe.
I’m proud to say that Australia has achieved some of the best health and economic outcomes in the world. Our aim has been clear: to save lives and livelihoods, keep Australians in jobs, and keep our businesses in business.
Throughout the crisis, a great strength of the Australian economy has been the resilience of our financial system.
Well-capitalised, our banks were in good condition as they faced the rapid deterioration in economic conditions.
They were able to offer restructuring of loans and deferred mortgage payments.
We’ve worked with our banks to support small business with payment deferrals and loan guarantees; and the insurance and superannuation sectors have also proven they’re willing and able to support customers in times of need.
These actions have cushioned the impact of the COVID-19 pandemic on the Australian economy.
Our key financial regulators have been working closely with institutions throughout this difficult time. The Council of Financial Regulators is the coordinating body for Australia’s main financial regulatory agencies. Focussing on a coordinated response to the COVID-19 pandemic, it has demonstrated the importance of regular, clear dialogue and messaging from regulators in times of crisis.
As the Australian economy is recovering, the financial system will continue to play an important role.
The Government, regulators and financial institutions will continue to work together. As required, they will take the necessary actions to support the continued resilience of our financial institutions, and ensure a strong recovery supporting businesses and households.
2. Australia’s fintech sector
It’s my priority that we keep Australia’s fintech ecosystem running during this crisis, and that we come out of this difficult period ahead of where we were.
We have a unique advantage in Australia: our fintech product offerings are diverse, and we have tremendous organic growth.
It has quickly become a mature industry, with a strong culture of collaboration by both challengers and incumbents.
According to the Fintech Australia Census, over three quarters of Australian fintechs are post-revenue, and one quarter of those companies have year-on-year growth of over 300%.
Building on our strong financial services foundations, we’re establishing a reputation for quality. Last year, seven Australian companies were named among the world’s top 100 fintechs.
It helps that Australians are keen adopters of financial technology – creating a solid customer base for an industry that can hold its own and continue to grow.
Critically, it’s also a globally-focused ecosystem. This year, over half of Australian fintech firms are focusing on expanding overseas, and over 40% already have an international presence.
You’ll recognise many of the rising stars – Airwallex, Afterpay, Judo Bank and Athena Home Loans are just some of those featured in this year’s Fintech100.
There are so many more who are working with the world’s foremost banks and governments.
The economic consequences of the COVID-19 pandemic has put pressure on many businesses, including in the fintech sector.
Some have found it more difficult to access capital. Limits on global movements and physical presence also pose barriers.
But the crisis is also a time for opportunities.
COVID-19 is driving a major increase in demand for digitisation. It is an ideal time to innovate and expand as people look for new ways to manage their business and personal financial affairs.
Fintechs are also by their nature nimble and can react and adjust more quickly than established institutions to emerging trends.
So I see fintech playing an important role in the recovery. It is good for consumers, good for competition, and good for the broader economy – qualities we need now more than ever.
3. Support for fintech through the COVID-19 pandemic
The Australian Government supports fintech by providing a world-class policy environment.
Our job in Government is not to do the work of the private sector, but to provide the platforms and support that businesses like you need along the way – to help Australians be more engaged with their finances, enhance financial literacy and capability, and drive competition across the financial services sector.
Consumer Data Right
One of the most important policy changes that is already underway is the introduction of the world-first Consumer Data Right (CDR).
This initiative empowers consumers like never before – opening the door to better and more convenient products and services, customised to the consumer’s needs.
The Consumer Data Right provides a way for consumers to safely and securely share data that relates to them, right across the economy.
It allows consumers to have access to their own data, in a standardised form, and to direct its secure transfer to third parties.
All data transfers through the Consumer Data Right will be on the consumer’s terms. Data can only be shared with the express and fully informed consent of the consumer.
This will allow consumers to realise the value of their data; and a time of renewed focus on personal data security, the CDR framework includes strengthened privacy protections.
The CDR will be implemented on a sector-by-sector basis – starting with open banking, and then moving to other sectors where consumers suffer from information asymmetry, including energy, telecommunications, superannuation, insurance and more.
In banking, which launched on 1 July this year, the CDR will revolutionise the way consumers and small businesses approach the financial system. It will allow consumers to shop around for a better deal; to use more sophisticated comparison apps; and ultimately, to reduce the time and cost of switching providers.
It comes after many years working with small and large financial institutions, fintechs and regulators to create a comprehensive set of data standards – and I’m encouraged by the interest from key partners in our region to expand the reach of those standards beyond our shores.
Despite the COVID-19 pandemic, we launched Open Banking this year because it’s never been more important to empower consumers and boost competition in the financial system.
At a time when many people find themselves under immense financial stress, Open Banking will make it easier for consumers to make changes to their financial affairs: switching or refinancing their mortgage, revising their investment risk appetite, looking at new credit or savings products.
Accredited fintechs can already connect into the system now. With consumers’ consent, they can analyse data and help consumers determine whether their banking products are best suited to their needs.
This has enormous potential. As the technology evolves, so too will the offerings that fintechs will be able to provide. This will spur competition and provide consumers with a wealth of choice.
And we’re already seeing strong interest from the Australian fintech ecosystem – after just three months, applications for accreditation are already well above our expectations.
The Australian Government is also promoting innovation in fintech by putting in place supportive regulatory arrangements.
In September this year, we launched an enhanced regulatory sandbox that allows businesses to test a wide range of products and services for a full 24 months – without obtaining a financial services licence or a credit licence from the Australian Securities and Investment Commission.
Reducing barriers to entry and promoting competition, this will provide a further boost to Australia’s fintech ecosystem.
The Government has also implemented several other measures in response to COVID-19 which benefit the fintech industry.
In our Federal Budget earlier this month, we’ve introduced significant new investment in regtech and payments infrastructure, and we’ve boosted government spending in research and development to unprecedented levels – so that early-stage startups can now claim a tax rebate of 62 cents in the dollar for their R&D expenditure.
Trade and international collaboration
Importantly, through this Budget, we’ve also funded an expansion of our Fintech Bridge program – to help Australia’s fintech ecosystem engage with more offshore customers, investors and regulators.
We’re constantly collaborating with other governments and regulatory counterparts in the fintech space: for example, we’ve established a UK-Australia Fintech Bridge which facilitates the entry of Australian and UK fintechs into each other’s jurisdictions.
We’re seeking to replicate that model with other jurisdictions – especially in our region – and we always welcome deeper engagement with the Chinese sector.
Australian fintech is a growing part of our digital trade in financial services, and we see enormous opportunities from greater cross-border investment and collaboration.
Australia’s financial expertise, resources, infrastructure and pro-entrepreneur approach to regulation and policy mean that we are well positioned to compete in the development of innovative financial products and services.
Increasingly we’re looking to the opportunities on our doorstep – taking advantage of Australia’s demographic advantages that make us an ideal testbed for Asian fintechs who want to enter western markets.
Australians are digitally and financially literate, we have excellent financial inclusion with a banked population of nearly 100%, and we have very similar demographics to much of Western Europe and North America.
There is no shortage of demand for Australian expertise in the Chinese market; and from the wider Asia-Pacific region, Australian firms draw a valuable source of capital and skills.
Our doors are open to foreign investment, especially in fintech, which is why the Prime Minister has set up a government Taskforce to focus on attracting high value business investment.
At a time when the COVID-19 pandemic puts up barriers to physical interactions, fintech can connect us globally – and here in Australia, we see fintech as a globally-engaged sector that will help lead our economic recovery.
Thank you again to the Bund Summit for inviting me. Many of you are at the absolute forefront of policy, regulation, and innovation. It’s been a privilege to address you today.